U.S. Nonfarm Productivity Rises by 4.6% in Third Quarter but Remains below Expectations

U.S. nonfarm business sector labor productivity rose by 4.6% in the third quarter of 2020 to remain below the second quarter’s 10.6% and forecasted 4.9%, according to the Bureau of Labor Statistics press release. The increase in productivity in Q3 resulted from the largest gains in both the output (43.4%) and the hours worked (37.1%). 

• Over the last four quarters, nonfarm business productivity rose 4.0%, reflecting a 3.4% decline in output and a 7.1% fall in hours worked.
• Unit labor costs in the nonfarm business sector declined at an annual rate of 6.6% in Q3, the combined effect of a 2.3% decrease in hourly compensation, and the 4.6% increase in productivity.
• Output and hours worked were 4.0% and 7.4% below their fourth-quarter 2019 levels, respectively.
• Manufacturing sector labor productivity rose at an annual rate of 19.9% in Q3 as output increased at a 56.2% annual rate and hours worked improved at a 30.3% annual rate.
• As of the third quarter, manufacturing output remains 5.7% below its fourth-quarter 2019 level, while hours worked is 6.8% lower. 
• Durable goods manufacturing was responsible for the majority of the 19.9% total manufacturing productivity increase as its output rose by 47.0%
• Durable goods reflected a 99.8% rise in output and a 35.9% increase in hours worked.
• Nondurable goods manufacturing productivity increased by 0.7%, as output rose by 22.6% and hours worked were up 21.8%
• Unit labor costs in the total manufacturing sector declined by 12.1%, the largest fall since the first quarter of 2020
• Total  manufacturing sector productivity rose by 1.0% over the last four quarters, as output fell by 5.8% and hours worked decreased by 6.7%

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